.biz, .us, .co master Neustar grabbed by the privates in $2.9bn deal

Vote of confidence in company after losing critical contract

Neustar has agreed to sell itself for $2.9bn to a San Francisco-based investment firm, taking the public company private.

The company's board voted unanimously to approve the offer from Golden Gate Capital that will see it pay $33.50 a share – a premium of 45 per cent from the date when it first disclosed a financial interest. The news saw Neustar shares jump 20 per cent on Wednesday to just under the offer price.

The purchase is a significant vote of confidence in the new strategic direction that CEO Lisa Hook has been taking the company following the loss of a government contract that represented half of the company's revenue.

That $500m Number Portability Administration Center (NPAC) contract, which routes calls and text messages across the entire country and which Neustar has run for over a decade, was awarded to Ericsson by the FCC back in March 2015.

Although Neustar suspected the FCC decision would go against it and had already embarked on a big effort to branch out into broader technical and advertising services, the contract loss still hit hard. It sued the FCC and managed to delay the handover by a year, during which it has pushed heavily in internet and advertising services, covering everything from running big brands' internet registries, to website protection, to building enormous databases of consumers for advertisers.

Split

Despite executives' best efforts, that strategic shift led to an increasing split within the company between the new and old cultures: a situation that resulted in the company announcing back in June that it would formally split into two different public companies, one covering security, marketing and related data services and the other its traditional order management and numbering services.

That announcement almost certainly piqued the interest of Golden Gate Capital, which is best known for purchasing restaurant chains but also picked up a range of undervalued tech companies following the dot-com bust.

As a private company, it will be much easier to sell off or shut down parts of the company and carry out a significant restructuring.

"We are pleased to have reached this agreement, which will deliver certain and immediate value to our shareholders," said Neustar chairman James Cullen.

"We believe this transaction will enable us to continue to execute against our strategy and strengthen our market position as a leader in marketing, risk, security and communication solutions," said Hook.

Golden Gate Capital's managing director Rishi Chandna said: "We strongly believe in the company's strategic direction and have been very impressed with the team's ability to transform the business into both a trusted, neutral provider to the telecom industry and a leading information services provider. We look forward to partnering with the Neustar team to achieve its strategic objectives."

The deal will close in the third quarter of 2017, subject to stakeholder approval. With their shares worth significantly more than they were yesterday, it seems unlikely that there will be much opposition. ®